DATAWORKS GROUP LIMITED — Annual Report 2017

Nov 13, 2017

ABN 85 612 182 368

FINANCIAL REPORT

for the year ended 30 June 2017

Contents	Page Number
Directors' Report	1
Auditor's Independence Declaration	4
Consolidated Statement of Profit or Loss and Other Comprehensive Income	5
Consolidated Statement of Financial Position	6
Consolidated Statement of Changes in Equity	7
Consolidated Statement of Cash Flows	8
Notes to the Consolidated Financial Statements	9
Directors' Declaration	25
Independent Auditor's Report	26

DIRECTORS' REPORT

The directors present this report on IXUPLimited (formerly "IXUP HoldingsPty Ltd")(the "Company") and its controlled entities (together the "IXUP Group", "Consolidated Entity" or "Group") together with the financial statements for the year ended 30 June 2017.

Information on Directors and Company Secretary

The names of each person who has been a director of the Company during the reporting period and to the date of this report are:

Mr Dean Cameron Joscelyne Ms Rhona Mary Imrie Marks Mr Marc Howard Goldman (appointed 1 September 2017)

Directors have been in office since the start of the reporting period to the date of this report unless otherwise stated.

The names of eachpersonwho has been a company secretary of the Companyduring thereporting periodand to the date of this report are:

Mr Dean Joscelyne (resigned on 15 July 2017) Mr Scott Mison (appointed on 15 July 2017)

Operating Results

The lossof theConsolidatedEntity after providing forincome tax amounted to \$2,993,668 (period from 20 August 2015 to 30 June2016: \$4,461,184).

Principal Activities

The Group's principal activities during the reporting period were development and sale of software.

On 4 September2017, theCompany changed its name from "IXUPHoldings Pty Ltd" to "IXUP Limited".There wereno othersignificant changes in the nature of the Group's activity during the reporting period.

Significant Changes in the State of Affairs

On 19 October 2016, the Company acquired 100% of the issued shares of IXUP Operations Pty Ltd (formerly "IXUP Pty Ltd") and as consideration issued shares in the Company to each former shareholder of IXUP Operations Pty Ltd (formerly "IXUP Pty Ltd") as part of a restructure of the IXUP Group.

On 18 May2017, a mandateletter (as varied from timeto time) with CygnetCapital Pty Ltd ("Cygnet") was signed on behalf of theIXUP Group in which an Initial Public Offering of the shares of IXUP Limited (formerly "IXUP Holdings Pty Ltd") would be undertaken.

Options and Warrants

On 19 October 2016, 11,426,470 warrants wereissuedtoAsiaPrincipal Capital GroupPte Ltdas part of a restructure of the IXUP Group. Subject to theterms of the warrant deed, thewarrants entitled the holderto subscribefor thenumber of ordinary shares in theCompany equal to 15% of thefullydiluted outstandingcapitalof theCompany.Thesewarrants werecancelled andan equivalent number of options were issued in their place on 1 September 2017.

Subsequent Events

The following events occurred after the reporting date:

a) On 28 August 2017, Cygnet raised \$250,000 in funding for the IXUP Group in the form of an increase in the Group's Convertible Note.

b) On 1 September 2017, the Company issued 32,000,000 options to entities associated with Mr Dean Joscelyne and Mr Marc Goldman. Each option entitles the holder to purchase one fully-paid share in the Company for \$0.25 per option over the 5-year life of the option.

c) On 1 September 2017, the Company issued 11,426,470 options to Asia Principal Capital Group Pte Ltd and 11,426,470 warrants were cancelled. Each option entitles the holder to purchase one fully-paid share in the Company for \$0.25 per option over the 5-year life of the option.

d) On 4 September 2017, the Company issued 5,162,500 shares to convert debts owed by the IXUP Group totaling \$826,000 into equity.

e) On 4 September 2017, the Company issued 1,031,250 new shares to raise \$165,000.

f) On 4 September 2017, the Company changed its name from "IXUP Holdings Pty Ltd" to "IXUP Limited".

DIRECTORS' REPORT

Directors' details

Mr Dean Cameron Joscelyne

Founder of the IXUP Group. Currently Head of Strategy and Innovation. Extensive experience in forming, building and scaling-up businesses. Company Secretary until his resignation on 15 July 2017.

Interests in shares:	25,500,001
Interests in unlisted options:	25,500,000
Interests in plan options:	1,000,000

Mr Marc Howard Goldman

Executive Director of the IXUP Group. Currently Chief Operating Officer. Experienced professional with a background in building software businesses, especially within the healthcare sector. Mr Goldman was appointed a Director on 1 September 2017.

Interests in shares:	4,500,000
Interests in unlisted options:	4,500,000
Interests in plan options:	1,000,000

Ms Rhona Mary Imrie Marks

Executive Director of the IXUP Group. Currently Senior Developer. Long-term member of the IXUP team, with particular expertise in software development.

Interests in shares, unlisted options and plan options: Nil

Shares, options and warrants issued

During and since the end of the financial year, the following securities were granted by the Company:

				Equivalent number of
			Number of securities	shares into which the
Recipient	Type of security	Date of issue	issued	securities convert
Asia Principal Capital Group Pte Ltd (i)	Warrants	19 Oct 2016	11,426,470	11,426,470
Asia Principal Capital Group Pte Ltd (i)	Unlisted Options	1 Sep 2017	11,426,470	11,426,470
JJG Group Pty Ltd atf The Goldman Family Trust (ii)	Unlisted Options	1 Sep 2017	4,500,000	4,500,000
JJG Group Pty Ltd atf The Goldman Family Trust (ii)	Plan Options	1 Sep 2017	1,000,000	1,000,000
Joscelyne Investments Pty Ltd atf Joscelyne Investments Unit Trust (iii)	Unlisted Options	1 Sep 2017	25,500,000	25,500,000
Joscelyne Investments Pty Ltd atf Joscelyne Investments Unit Trust (iii)	Plan Options	1 Sep 2017	1,000,000	1,000,000
White Swan Nominees Pty Ltd (iv)	Shares	4 Sep 2017	1,031,250	n/a
Temorex Pty Ltd (vii)	Shares	4 Sep 2017	1,875,000	n/a
Mr Darien Jagger (v) (vii)	Shares	4 Sep 2017	737,500	n/a
Mahsor Holdings Pty Ltd (iv) (vii)	Shares	4 Sep 2017	737,500	n/a
APC Group Holdings Pty Ltd (vi) (vii)	Shares	4 Sep 2017	625,000	n/a
Asia Pacific Capital - Corporate Finance Pty Ltd (vi) (vii)	Shares	4 Sep 2017	625,000	n/a
Brown Bricks Pty Ltd (vii)	Shares	4 Sep 2017	562,500	n/a

Notes

(i) The warrants issued on 19 Octobert 2016 were cancelled and an equivalent number of unlisted options were issued in their place.

(ii) JJG Group Pty Ltd atf The Goldman Family Trust is an entity controlled by Mr Marc Goldman.

(iii) Joscelyne Investments Pty Ltd atf Joscelyne Investments Unit Trust is an entity controlled by Mr Dean Joscelyne.

(iv) White Swan Nominees Pty Ltd and Mahsor Holdings Pty Ltd are entities associated with Cygnet Capital Pty Ltd. On 4 September 2017, the Company issued 1,031,250 new shares to raise \$165,000.

(v) Mr Darien Jagger is a director of Cygnet Capital Pty Ltd.

(vi) APC Group Holdings Pty Ltd and Asia Principal Capital - Corporate Finance Pty Ltd are entities associated with Asia Principal Capital Group Pte Ltd.

(vii) On 4 September 2017, the Company issued 5,162,500 shares to convert debts owed by the IXUP Group totaling \$826,000 into equity.

On 1 September 2017, the Company approved an Employee Share Ownership Plan ("ESOP") to incentivise and retain key employees. The Board can invite key employees to participate in the ESOP, through which the employee can earn Plan Options which are subject to certain vesting conditions. Each Plan Option entitles the holder to purchase one fully-paid share in the Company for \$0.25 per option over the 5-year life of the option, subject to satisfying specified vesting conditions.

Under the terms of the ESOP, up to 10,875,000 Plan Options may be issued. As at the date of this report, the Company has 8,875,000 unissued Plan Options.

DIRECTORS' REPORT

Directors' meetings

The following table sets out the number of directors' meetings held during the financial year and the number of meetings attended by each director.

Director	Held	Attended
Mr Dean Cameron Joscelyne
Ms Rhona Mary Imrie Marks

Environmental Issues

The IXUP Group's operations are not regulated by any significant environmental regulations under a law of the Commonwealth or of a state or territory of Australia.

Dividends paid or recommended

No dividends were paid or declared since the start of the reporting period. No recommendation for payment of dividends has been

Indemnification and Insurance of Officers

During the reporting period, the IXUP Group paid premiums in respect of a contract insuring the directors and officers of the Company and of any related body corporate against a liability incurred as such a director or officer to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium. The IXUP Group has not otherwise, during or since the end of the financial year, except to the extent permitted by law, indemnified or agreed to indemnify an officer of the Company or of any related body corporate against a liability incurred as such an officer.

Indemnification and Insurance of Auditors

No indemnities have been given or insurance premiums paid, during or since the end of the reporting period, for any person who is or has been an auditor of the Company.

Future Developments

Page 3

Other than as referred to in this report, further information as to likely future developments in the operations of the IXUP Group and expected results of those operations would, in the opinion of the directors, be speculative only.

Proceedings on Behalf of the Company

No person has applied for leave of Court to bring proceedings on behalf of the Company or intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those proceedings.

Auditor's Independence Declaration

The auditor's independence declaration is included after this report.

Signed in accordance with a resolution of the directors made pursuant to S.298(2) of the Corporations Act 2001:

Director:	Dean Cameron Joseelyne
Dated:	22 September 2017

AUDITOR'S INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE CORPORATIONS ACT 2001 TO THE DIRECTORS OF IXUP LIMITED

I declare that, to the best of my knowledge and belief during the year ended 30 June 2017 there have been:

• no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and
• no contraventions of any applicable code of professional conduct in relation to the audit.

William Buck

William Buck Audit (WA) Pty Ltd ABN 67 125 012 124

Conley Manifis Director Dated this 22^nd day of September, 2017

CHARTERED ACCOUNTANTS & ADVISORS

Level 3, 15 Labouchere Road South Perth WA 6151 PO Box 748 South Perth WA 6951 Telephone: +61 8 6436 2888 williambuck.com

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME for the year ended 30 June 2017

		Year ended 30 June 2017	Period from 20 August 2015 to 30 June 2016
	Note	\$	\$
Revenue	3	153,695	247,610
Cost of sales		(20,562)	(15,488)
Gross profit		133,133	232,122
Other income	4	4,818	293
Gain recognised on debt forgiveness	5	1,148,131	-
Employee benefits expense	6	(2,249,131)	(1,542,668)
Share-based payments	7	-	(1,839,662)
Administrative costs	8	(1,206,955)	(1,250,393)
Depreciation and amortisation	9	(526,205)	(268,417)
Occupancy costs	10	(213,185)	(214,486)
Finance costs	11	(84,273)	(1,924)
Foreign currency losses		-	(1,831)
LOSS FROM ORDINARY ACTIVITIES BEFORE INCOME TAX		(2,993,668)	(4,886,965)
Income tax benefit	20	-	425,781
LOSS FROM ORDINARY ACTIVITIES AFTER INCOME TAX		(2,993,668)	(4,461,184)
Other comprehensive income, net of income tax		-	-
TOTAL COMPREHENSIVE LOSS FOR THE YEAR/PERIOD		(2,993,668)	(4,461,184)
Loss per share for loss attributable to the owners of the parent		Cents	Cents
Basic and diluted loss per share	29	(6.6)	(7.3)

The accompanying notes are an integral part of the accounts. To be read in conjunction with the Financial Report.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

as at 30 June 2017

		30 June 2017	30 June 2016
	Note	\$	\$
ASSETS
CURRENT ASSETS
Cash and cash equivalents	18	1,396,756	39,110
Trade and other receivables	12	17,402	555,166
TOTAL CURRENT ASSETS		1,414,158	594,276
NON-CURRENT ASSETS
Intangibles	13	1,037,531	1,539,012
Property, plant and equipment	14	-	-
TOTAL NON-CURRENT ASSETS		1,037,531	1,539,012
TOTAL ASSETS		2,451,689	2,133,288
LIABILITIES
CURRENT LIABILITIES
Trade and other payables	15	1,384,786	547,514
Borrowings	16	3,142,274	731,888
Provisions	17	125,892	61,482
TOTAL CURRENT LIABILITIES		4,652,952	1,340,884
TOTAL LIABILITIES		4,652,952	1,340,884
NET (LIABILITIES) / ASSETS		(2,201,263)	792,404
EQUITY
Issued capital	27	3,413,927	3,413,926
Equity-settled reserve	28	1,839,662	1,839,662
Accumulated losses		(7,454,852)	(4,461,184)
TOTAL EQUITY		(2,201,263)	792,404

The accompanying notes are an integral part of the accounts.

To be read in conjunction with the Financial Report.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the year ended 30 June 2017

		Equity-settled	Accumulated
	Issued capital	reserve	losses	Total equity
	\$	\$	\$	\$
Balance at 20 August 2015	-	-	-	-
Loss for the period	-	-	(4,461,184)	(4,461,184)
Other comprehensive income, net of income tax	-	-	-	-
Total comprehensive loss for the period	-	-	(4,461,184)	(4,461,184)
Transactions with shareholders in their capacity as owners: Issue of shares
Share issue costs	3,463,925	-	-	3,463,925
	(50,000)	-	-	(50,000)
Issue of warrants	-	1,839,662	-	1,839,662
Balance at 30 June 2016	3,413,926	1,839,662	(4,461,184)	792,404
Balance at 1 July 2016 Loss for the period Other comprehensive income, net of income tax	3,413,926 - -	1,839,662 - -	(4,461,184) (2,993,668) -	792,404 (2,993,668) -
Total comprehensive loss for the period	-	-	(2,993,668)	(2,993,668)
Transactions with shareholders in their capacity as owners: Issue of shares Share issue costs Issue of warrants	1 - -	- - -	- - -	1 - -
Balance at 30 June 2017	3,413,927	1,839,662	(7,454,852)	(2,201,263)

The accompanying notes are an integral part of the accounts. To be read in conjunction with the Financial Report.

CONSOLIDATED STATEMENT OF CASH FLOWS

for the year ended 30 June 2017

			Period from
		Year ended	20 August 2015
		30 June 2017	to 30 June 2016
	Note	\$	\$
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers		270,496	118,517
Payments to suppliers and employees		(2,872,425)	(2,417,792)
Tax R&D benefit received		425,781	-
Net Cash used in Operating Activities	18	(2,176,148)	(2,299,275)
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for intangible assets		(19,644)	(1,759,379)
Payments for property, plant and equipment		(5,080)	(48,050)
Net Cash used in Investing Activities		(24,724)	(1,807,429)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings		3,558,517	731,888
Proceeds from issue of shares		1	3,463,926
Payment for share issue cost		-	(50,000)
Net Cash generated by Financing Activities		3,558,518	4,145,814
Net increase in cash and cash equivalents		1,357,646	39,110
Cash and cash equivalents at the beginning of the reporting year/period		39,110	-
CASH AND CASH EQUIVALENTS AT THE END OF THE REPORTING YEAR/PERIOD	18	1,396,756	39,110

The accompanying notes are an integral part of the accounts. To be read in conjunction with the Financial Report.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 30 June 2017

NOTE 1: GENERAL INFORMATION

The consolidated financial report covers IXUP Limited (formerly "IXUP Holdings Pty Ltd") (the "Company"), IXUP Operations Pty Ltd (formerly "IXUP Pty Ltd") and IXUP IP Pty Ltd (together the "IXUP Group", "Consolidated Entity" or "Group"). All members of the IXUP Group are for profit companies which are incorporated and domiciled in Australia.

The registered office and principal place of business for the IXUP Group is Level 3, 5-11 Bridge Street, Sydney.

NOTE 2: SIGNIFICANT ACCOUNTING POLICIES

Statement of Compliance

These financial statements are general purpose financial statements which have been prepared in accordance with the Corporations Act 2001, Accounting Standards and Interpretations, and comply with other requirements of the law.

Accounting Standards include Australian Accounting Standards. Compliance with Australian Accounting Standards ensures that the financial statements and notes of the company and the Group comply with International Financial Reporting Standards ('IFRS').

The financial statements comprise the consolidated financial statements of the Group.

The functional and presentation currency of the Group is Australian dollars.

The financial report was authorised for issue by the Directors on 22 September 2017.

Basis of Preparation

IXUP Operations Pty Ltd (formerly "IXUP Pty Ltd") was incorporated on 20 August 2015 and as such comparative figures reflect the period from incorporation until 30 June 2016. However, the financial statements for the year ended 30 June 2017 include the results for IXUP Limited (formerly "IXUP Holdings Pty Ltd") which was part of the Consolidated Entity as at 30 June 2017.

The consolidated financial statements have been prepared on the basis of historical cost, except for certain financial instruments that are measured at revalued amounts or fair values at the end of each reporting period, as explained in the accounting policies below. Historical cost is generally based on the fair values of the consideration given in exchange for goods and services. All amounts are presented in Australian dollars, unless otherwise noted.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Group takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these consolidated financial statements is determined on such a basis, except for share-based payment transactions that are within the scope of AASB 2, leasing transactions that are within the scope of AASB 117, and measurements that have some similarities to fair value but are not fair value, such as net realisable value in AASB 2 or value in use in AASB 136.

In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:

• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;
• Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and
• Level 3 inputs are unobservable inputs for the asset or liability.

The significant accounting policies adopted in the preparation of these financial statements are presented below.

Going Concern

The financial report has been prepared on a going concern basis which assumes the settlement of liabilities and the realisation of assets in the normal course of business.

The consolidated entity has incurred a loss of \$2,993,668 (period ended 30 June 2016: \$4,461,184) and experienced net cash outflows from operating and investing activities of \$2,200,872 (period ended 30 June 2016: \$4,106,704) during the year ended 30 June 2017. As at 30 June 2017, the consolidated entity had cash and cash equivalents of \$1,396,756 (2016: \$39,110).

These conditions indicate a material uncertainty that may cast significant doubt about the IXUP Group's ability to continue as a going concern.

Notwithstanding this, the directors believe that it is appropriate to prepare the financial report on a going concern basis after consideration of the following matters:

• The IXUP Group has secured new business partners subsequent to year end and is expecting future revenues.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 30 June 2017

• The IXUP Group has appointed Cygnet Capital Pty Ltd ("Cygnet") to assist with completing an Initial Public Offering ("IPO") and, as part of that IPO, new capital in the amount of at least \$12.5m will be raised. Cygnet is an Australian boutique corporate advisory and investment banking group focussed on leading fundraisings for emerging companies. On 22 May 2017 and 13 June 2017, Cygnet raised \$2.25m in funding for the IXUP Group in the form of a Convertible Note.
• Since year end, the IXUP Group has converted debts totalling \$826,000 into equity and has obtained financial support in the form of new issued capital totalling \$165,000. A further \$250,000 has been raised by Cygnet for the IXUP Group in the form of an increase in the Convertible Note already issued by the IXUP Group.
• A director and shareholder who has financial capacity has advised the Company that financial support will be provided to the Company should the IPO be unsuccessful.
• On 31 May 2017, the director and shareholder, Dean Cameron Joscelyne, and related entities forgave an amount of \$1.1m.
• The directors are confident that the IXUP Group will obtain additional financial support from existing shareholders, should that support be required before the IPO is completed.

Should the consolidated entity be unable to achieve the matters set out above, there is material uncertainty regarding whether the consolidated entity will be able to continue as a going concern and therefore, whether the consolidated entity will be able to realise its assets and extinguish its liabilities in the normal course of business. The financial report does not include adjustments relating to the recoverability and classification of recorded asset amounts, or to the amounts and classification or liabilities that might be necessary should the consolidated entity not continue as a going concern.

New accounting standards for application in future periods

The AASB has issued new and amended accounting standards and interpretations that have mandatory application dates for future reporting periods and which the Group has decided not to early adopt. A discussion of those future requirements and their impact on the Group is as follows:

• AASB 9 Financial Instruments (December 2014) and AASB 2014-7 Amendments to Australian Accounting Standards arising from AASB 9 (December 2014) (applicable for annual reporting periods commencing on or after 1 January 2018)

AASB 9 includes requirements for the classification and measurement of financial assets, the accounting requirements for financial liabilities, impairment testing requirements and hedge accounting requirements.

The changes made to accounting requirements by these standards include:

• simplifying the classifications of financial assets into those carried at amortised cost and those carried at fair value and an allowance for debt instruments to be carried at fair value through other comprehensive income in certain circumstances
• simplifying the requirements for embedded derivatives
• allowing an irrevocable election on initial recognition to present gains and losses on investments in equity instruments that are not held for trading in other comprehensive income. Dividends in respect of these investments that are a return on investment can be recognised in profit or loss and there is no impairment or recycling on disposal of the instrument
• financial assets will need to be reclassified where there is a change in an entity's business model as they are initially classified based on (a) the objective of the entity's business model for managing the financial assets; and (b) the characteristics of the contractual cash flows
• amending the rules for financial liabilities that the entity elects to measure at fair value, requiring changes in fair value attributed to the entity's won credit risk to be presented in other comprehensive income
• introducing new general hedge accounting requirements intended to more closely align hedge accounting with risk management activities as well as the addition of new disclosure requirements
• requirements for impairment of financial assets

The Group has not yet assessed the impact of this standard.

• AASB 15 Revenue from Contracts with Customers, AASB 2014-5 Amendments to Australian Accounting Standards arising from AASB 15, AASB 2015-8 Effective Date of AASB 15 and AASB 2016-3 Clarifications to AASB 15 (applicable for annual reporting periods commencing on or after 1 January 2018)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 30 June 2017

AASB 15 establishes a single, comprehensive framework for revenue recognition, and replaces the previous revenue Standards AASB 118 Revenue and AASB 111 Construction Contracts, and the related Interpretations on revenue recognition Interpretation 13 Customer Loyalty Programmes, Interpretation 15 Agreements for the Construction of Real Estate, Interpretation 18 Transfers of Assets from Customers and Interpretation 131 Revenue—Barter Transactions Involving Advertising Services.

AASB 15 introduces a five step process for revenue recognition with the core principle of the new Standard being for entities to recognise revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration (that is, payment) to which the entity expects to be entitled in exchange for those goods or services.

AASB 15 will also result in enhanced disclosures about revenue, provide guidance for transactions that were not previously addressed comprehensively (for example, service revenue and contract modifications) and improve guidance for multiple-element arrangements.

The Group has not yet assessed the impact of this standard.

• AASB 16 Leases (applicable for annual reporting periods commencing on or after 1 January 2019)

AASB 16 introduces a single lessee accounting model that requires all leases to be accounted for on balance sheet. A lessee will be required to recognise an asset representing the right to use the underlying asset during the lease term (ie right-of-use asset) and a liability to make lease payments (ie lease liability). Two exemptions are available for leases with a term less than 12 months or if the underlying asset is of low value.

The lessor accounting requirements are substantially the same as in AASB 117. Lessors will therefore continue to classify leases as either operating or finance leases.

AASB 16 will replace AASB 117 Leases, Interpretation 4 Determining Whether an Arrangement contains a Lease, Interpretation 115 Operating Leases – Incentives and interpretation 127 Evaluating the Substance of Transactions Involving the Legal Form of a Lease.

The Group has not yet assessed the impact of this standard.

• AASB 2016-1 Amendments to Australian Accounting Standards – Recogntion of Deferred Tax Assets for Unrealised Losses (applicable for annual reporting periods commencing on or after 1 January 2017)

This standard amends AASB 112 Income Taxes to clarify how deferred tax assets are accounted for when they relate to debt instruments measured at fair value.

The Group has not yet assessed the impact of this standard.

• AASB 2016-2 Amendments to Australian Accounting Standards – Disclosure Initative: Amendments to AASB 107 (applicable for annual reporting periods commencing on or after 1 January 2017)

This standard amends AASB 107 Cash Flow Statements to require disclosure of information that allows users to understand the changes in liabilities from financing activities.

The Group has not yet assessed the impact of this standard.

• AASB 2016-4 Amendments to Australian Accounting Standards – Recoverable Amount of Non-Cash-Generating Specialised Assets of Not-for-Profit Entities (applicable for annual reporting periods commencing on or after 1 January 2017)

This standard amends AASB 136 Impairment of Assets to remove references to depreciated replacement cost as a measure of value in use for not-for-profit entities and to clarify that the recoverable amount of primarily non-cash-generating assets of not-forprofit entities, which are typically specialised in nature and held for continuing use of their service capacity, is expected to be materially the same as fair value determined under AASB 13 Fair Value Measurement.

The Group has not yet assessed the impact of this standard.

• AASB 2016-5 Amendments to Australian Accounting Standards – Classification and Measurement of Share-based Payment Transactions (applicable for annual reporting periods commencing on or after 1 January 2018)

This standard amends AASB 2 Share-based Payments to address:

• The accounting for the effects of vesting and non-vesting conditions on the measurement of cash-settled share-based payments

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 30 June 2017

• The classification of share-based payment transactions with a net settlement feature for withholding tax obligations; and
• The accounting for a modification to the terms and conditions of a share-based payment that changes the classification of the transaction from cash-settled to equity-settled.

The Group has not yet assessed the impact of this standard.

The Group does not anticipate early adoption of any of the above Australian Accounting Standards or interpretations.

Basis of Consolidation

The consolidated financial statements incorporate the financial statements of the entities controlled by the Company. Control is achieved when the Company:

• has power over the investee;
• is exposed, or has rights, to variable returns from its involvement with the investee; and
• has the ability to use its power to affect its returns.

The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above.

All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the IXUP Group are eliminated in full on consolidation.

Property, Plant and Equipment

Each class of property, plant and equipment is carried at cost less, where applicable, any accumulated accumulated depreciation and impairment losses. Plant and equipment are measured using the cost model.

Costs include purchase price, other directly attributable costs and the initial estimate of the costs of dismantling and restoring the asset, where applicable.

Depreciation

Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.

Financial instruments

Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the instrument.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.

Financial assets

Loans and receivables

Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as 'loans and receivables'. Loans and receivables are measured at amortised cost using the effective interest method, less any impairment. Interest income is recognised by applying the effective interest rate, except for short-term receivables when the effect of discounting is immaterial.

Impairment of financial assets

Financial assets are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected.

Trade receivables are assessed for impairment on a collective basis even if they were assessed not to be impaired individually. Objective evidence of impairment for a portfolio of receivables include the Group's past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period of 60 days, as well as observable changes in national or local economic conditions that correlate with default on receivables.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 30 June 2017

For financial assets that are carried at cost, the amount of the impairment loss is measured as the difference between the asset's carrying amount and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment loss will not be reversed in subsequent periods.

Derecognition of financial assets

The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.

On derecognition of a financial asset in its entirety, the difference between the asset's carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised in other comprehensive income and accumulated in equity is recognised in profit or loss.

Financial liabilities and equity instruments

Classification as debt or equity

Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangement.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Group are recognised at the proceeds received, net of direct issue costs.

Compound Instruments

The component parts of compound instruments (convertible bonds) issued by the Group are classified separately as financial liabilities and equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument. Conversion options that will be settled by the exchange of a fixed amount of cash or another financial asset for a fixed number of the Company's own equity instruments is an equity instrument.

At the date of issue, the fair value of the liability component is estimated using the prevailing market interest rate for similar nonconvertible instruments. This amount is recognised as a liability on an amortised cost basis using the effective interest method until extinguished upon conversion or at the instrument's maturity date.

The conversion option classified as equity is determined by deducting the amount of the liability component from the fair value of the compound instrument as a whole. This is recognised and included in equity, net of income tax effects, and is not subsequently remeasured. In addition, the conversion option classified as equity will remain in equity until the conversion option is exercised, in which case, the balance recognised in equity will be transferred to issued capital. Where the conversion option remains unexercised at the maturity date of the convertible note, the balance recognised in equity will be transferred to retained earnings. No gain or loss is recognised in profit or loss upon conversion or expiration of the conversion option.

Transaction costs that relate to the issue of the convertible notes are allocated to the liability and equity components in proportion to the allocation of the gross proceeds. Transaction costs relating to the equity component are recognised directly in equity. Transaction costs relating to the liability component are included in the carrying amount of the liability component and are amortised over the lives of the convertible notes using the effective interest method.

Other financial liabilities

Other financial liabilities, including borrowings and trade and other payables, are initially measured at fair value, net of transaction costs.

Other financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis.

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 30 June 2017

Derecognition of financial liabilities

The Group derecognises financial liabilities when, and only when, the Group's obligations are discharged, cancelled or they expire. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.

Impairment of Non-Financial Assets

At the end of each reporting period the directors determine whether there is an evidence of an impairment indicator for nonfinancial assets.

Where this indicator exists and regardless for goodwill, indefinite life intangible assets and intangible assets not yet available for use, the recoverable amount of the asset is estimated.

Where assets do not operate independently of other assets, the recoverable amount of the relevant cash-generating unit (CGU) is estimated.

The recoverable amount of an asset or CGU is the higher of the fair value less costs of disposal and the value in use. Value in use is the present value of the future cash flows expected to be derived from an asset or cash-generating unit.

Where the recoverable amount is less than the carrying amount, an impairment loss is recognised in profit or loss.

Reversal indicators are considered in subsequent periods for all assets which have suffered an impairment loss.

Cash and Cash Equivalents

Cash and cash equivalents comprises cash on hand, demand deposits and short-term investments which are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value.

Revenue Recognition

Revenue is recognised when the amount of the revenue can be measured reliably, it is probable that economic benefits associated with the transaction will flow to the company and specific criteria relating to the type of revenue as noted below, has been satisfied.

All revenue is stated net of the amount of goods and services tax (GST).

Revenue is measured at the fair value of the consideration received or receivable and is presented net of returns, discounts and rebates.

Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the company and the amount of revenue can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount on initial recognition.

Rendering of services

Revenue in relation to rendering of services is recognised depending on whether the outcome of the services can be measured reliably. If this is the case then the stage of completion of the services is used to determine the appropriate level of revenue to be recognised in the period. If the outcome cannot be reliably measured then revenue is recognised to the extent of expenses recognised that are recoverable.

Goods and Services Tax (GST)

Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except where the amount of GST incurred is not recoverable from the Australian Taxation Office (ATO).

Receivables and payables are stated inclusive of GST. The net amount of GST recoverable from, or payable to, the ATO is included as part of receivables or payables in the statement of financial position.

Share-based payments arrangements

Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the equity instruments at the grant date. Details regarding the determination of the fair value of equity-settled share-based transactions are set out in the notes to the accounts.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the year ended 30 June 2017

The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straightline basis over the vesting period, based on the Group's estimate of equity instruments that will eventually vest, with a corresponding increase in equity. At the end of each reporting period, the Group revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the equity-settled employee benefits reserve.

Equity-settled share-based payment transactions with parties other than employees are measured at the fair value of the goods or services received, except where that fair value cannot be estimated reliably, in which case they are measured at the fair value of the equity instruments granted, measured at the date the entity obtains the goods or the counterparty renders the service.

Reclassification of financial information

In the course of preparing the consolidated general purpose financial statements, the Company has changed the classification of certain items in its financial statements to ensure it complies with the applicable disclosure requirements.

The items which have been reclassified are amounts totalling \$367,666 which were reported as personnel costs in the financial statements for the period ended 30 June 2016, but which have been reported as administrative costs in the financial statements for the year ended 30 June 2017. The reclassification has been undertaken to ensure comparability of the results reported in the financial statements for the year ended 30 June 2017.

Foreign Currencies

In preparing the financial statements, transactions in currencies other than the Group's functional currency (foreign currencies) are recognised at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Provisions

Provisions are recognised when the group has a present (legal or constructive) obligation as a result of a past event, when it is probable the group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the reporting date, taking into account the risks and uncertainties surrounding the obligation. If the time value of money is material, provisions are discounted using a current pre-tax rate specific to the liability. The increase in the provision resulting from the passage of time is recognised as a finance cost.

Intangibles

Expenditure on research activities is recognised as an expense in the period in which it is incurred. Where no internally-generated intangible can be recognised, development expenditure is recognised in profit or loss in the period in which it is incurred.

An internally-generated intangible asset arising from development (or from the development phase of an internal project) is recognised if, and only if, all of the following have been demonstrated:

• the technical feasibility of completing the intangible asset so that it will be available for use or sale:
• the intention to complete the intangible asset and use or sell it;
• the ability to use or sell the intangible asset; and
• how the intangible asset will generate probable future economic benefits.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 30 June 2017

Amortisation is recognised so as to write off the cost of internally-generated assets over their useful lives, using the straight-line method. The estimated useful lives and amortisation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. The following useful lives are used in the calculation of amortisation:

• Software	3.33 years
• Trademarks and other intangibles	8 years

Current Tax

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit before tax as reported in the statement of profit or loss and other comprehensive income because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Group's current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period. Current tax liabilities are therefore measured at the amounts expected to be paid to / recovered from the relevant taxation authority.

Deferred Tax

Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences.

Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from the initial recognition (other than in a business combination) of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Restructuring of the IXUP Group

IXUP Operations Pty Ltd (formerly "IXUP Pty Ltd") was incorporated on 20 August 2015 and as such comparative figures reflect the period from incorporation until 30 June 2016. However, the financial statements for the year ended 30 June 2017 include the results for IXUP Limited (formerly "IXUP Holdings Pty Ltd") which was part of the Consolidated Entity as at 30 June 2017.

On 19 October 2016, the Company acquired all the share capital of IXUP Operations Pty Ltd (formerly "IXUP Pty Ltd") through the issue of 64,750,000 ordinary fully paid shares.

The Group has treated the acquisition of its entities and net assets as common control transactions. As a consequence, no acquisition accounting in the form of a purchase price allocation was undertaken and therefore the assets and liabilities have not been remeasured to fair value nor has any goodwill arisen. All the assets and liabilities acquired by the Group as a result of the restructure were recognised at values consistent with the carrying value of those assets and liabilities immediately prior to the restructure.

Critical Accounting Judgments and Key Sources of Estimation Uncertainty

In the application of the Group's accounting policies, which are described in Note 2, the directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period. Alternatively, if the revision affects both current and future periods, the revision to the accounting estimate is recognised in the period of the revision as well as in future periods.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 30 June 2017

	Year ended 30 June 2017 \$	Period from 20 August 2015 to 30 June 2016 \$
NOTE 3: REVENUE
Software Revenues	153,695	247,610
	153,695	247,610
NOTE 4: OTHER INCOME
FBT Reimbursement	2,107	-
Other Income	1,839	-
Interest Income	872	293
	4,818	293
NOTE 5: GAIN RECOGNISED ON DEBT FORGIVENESS
Gain recognised on debt forgiveness	1,148,131	-
	1,148,131	-

On 31 May 2017, the director and shareholder, Dean Cameron Joscelyne, and related entities forgave an amount of \$1.1m.

NOTE 6: EMPLOYEE BENEFITS EXPENSE

Wages and salaries	1,986,715	1,367,316
Superannuation costs	181,850	132,506
Other employee benefits	80,566	42,846
	2,249,131	1,542,668

Employee superannuation

The employees of the Company are each a member of a superannuation fund as required by Australian law. The Company is required to contribute a specified percentage of payroll costs to the superannuation fund nominated by the employee to fund the benefits. The only obligation of the Group with respect to the retirement benefit plan is to make the specified contributions.

As at reporting date, contributions of \$27,477 (2016: \$27,641) due in respect of the current reporting period had not been paid. These amounts were paid subsequent to the end of the reporting year/period.

NOTE 7: SHARE-BASED PAYMENTS

Equity-settled share-based payments	-	1,839,662
	-	1,839,662
NOTE 8: ADMINISTRATIVE COSTS
Professional adviser costs	317,314	187,485
Legal expenses	305,533	289,157
Consulting costs paid to entities related to the directors	281,142	250,000
Recruitment costs	127,651	117,666
Advertising and promotion	50,804	153,019
Travel	42,532	149,497
Software licences	25,386	35,430
Other	56,593	68,138
	1,206,955	1,250,393
NOTE 9: DEPRECIATION AND AMORTISATION
Depreciation and amortisation	526,205	268,417
	526,205	268,417
NOTE 10: OCCUPANCY COSTS
Rent	172,252	183,725
Other occupancy costs	40,933	30,761
	213,185	214,486
NOTE 11: FINANCE COSTS
Interest costs	84,272	1,924
	84,272	1,924

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 30 June 2017

30 June 2017 \$	30 June 2016 \$
-	94,935
17,402	26,890
-	425,781
-	7,560
17,402	555,166

The Company has recognised an allowance for doubtful debts of 100% (excluding GST) against all receivables over 120 days based on management's view that receivables older than 120 days are unlikely to be recovered in full.

As at reporting date, accounts receivable of nil (2016: Nil) were older than 120 days. Accordingly, in the year ended 30 June 2017, the Group recognised nil (2016: Nil) in impairment losses on receivables (excluding GST). As at reporting date, accounts receivable of nil (2016: Nil) were past due but not impaired.

NOTE 13: INTANGIBLES
Software	1,731,909	1,731,909
Less accumulated amortisation	(735,374)	(218,024)
	996,535	1,513,885
Trademarks and other intangibles	47,113	27,470
Less accumulated amortisation	(6,117)	(2,343)
	40,996	25,127
	1,037,531	1,539,012
NOTE 14: PROPERTY, PLANT AND EQUIPMENT
Office equipment	27,723	27,183
Less accumulated depreciation	(27,723)	(27,183)
	-	-
Computer equipment	25,407	20,867
Less accumulated depreciation	(25,407)	(20,867)
	-	-
NOTE 15: TRADE AND OTHER PAYABLES
Accounts payable	855,860	328,199
Trade payables due to related parties	399,007	109,972
Amounts payable to former employees	90,243	-
Superannuation Payable	27,477	27,640
Accruals	8,203	49,139
Other payables	3,997	32,565
	1,384,786	547,514

The average credit period allowed by trade creditors to the Group which are not related parties is approximately 24 days.

The related parties have confirmed that they will not call on the outstanding payable balance owed to the Company for a period of at least 12 months from the date of the approval of these financial statements, until such time the Company has sufficient available resources.

NOTE 16: BORROWINGS

Loans from:

- Related Parties (i)	-	703,288
- Other Entities (ii)	892,274	28,600
- Convertible Notes (iii)	2,250,000	-
	3,142,274	731,888

Explanatory notes to borrowing arrangements

Note (i): Unsecured amounts repayable to entities related to the IXUP Group. As at 30 June 2017, the weighted average annual effective interest rate on the loans is 0.0% (2016: 2.7%). On 31 May 2017, Dean Cameron Joscelyne and his related entities forgave \$1.1m of debts owed by the IXUP Group.

Note (ii): Unsecured at-call amounts repayable to other entities. The weighted average annual effective interest rate on these loans is 1.0% (2016: Nil%). Since year end, the IXUP Group has converted borrowings totalling \$826,000 into equity.

Note (iii): Convertible Note issued by the IXUP Group. This instrument is non-interest bearing and is convertible into fully-paid ordinary shares in the Company. Since year end, a further \$250,000 has been raised by Cygnet for the IXUP Group in the form of an increase in the amount of this Convertible Note.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 30 June 2017

30 June 2017 \$	30 June 2016 \$
86,115	61,482
20,459	-
19,318	-
125,892	61,482

NOTE 18: CASH AND CASH EQUIVALENTS

Reconciliation of cash

Cash at the end of financial year/period as shown in the Consolidated Statement of Cash Flows is reconciled to the related items in the Consolidated Statement of Financial Position as follows:

Cash at bank	1,396,756	38,990
Cash on hand	-	120
	1,396,756	39,110
	Year ended 30 June 2017 \$	Period from 20 August 2015 to 30 June 2016 \$
Reconciliation of loss from ordinary activities to cash flows from operating activities
Loss from ordinary activities after tax	(2,993,668)	(4,461,184)
Income tax benefit recognised in profit or loss	-	(425,781)
Non-cash items:
Issue of warrants	-	1,839,662
Gain on debt forgiveness	(1,148,131)	-
Depreciation and amortisation	526,205	268,417
(Increase)/decrease in assets:
Trade and other receivables	111,983	(129,387)
Tax R&D benefit	425,781	-
Increase/(decrease) in liabilities:
Trade and other payables	837,272	547,514
Provisions	64,410	61,483
Net cash used in operating activities	(2,176,148)	(2,299,276)

NOTE 19: NON-CASH TRANSACTIONS

During the current year, the Group entered into the following non-cash investing and financing activities, which are not reflected in the consolidated statement of cash flows:

(a) On 19 October 2016, the Company acquired 100% of the issued share capital of IXUP Operations Pty Ltd (formerly "IXUP Pty Ltd") and as consideration issued shares in the Company to each former shareholder of IXUP Operations Pty Ltd (formerly "IXUP Pty Ltd") as part of a restructure of the IXUP Group.

(b) On 31 May 2017, Dean Cameron Joscelyne and his related entities forgave \$1.1m of debts owed by the IXUP Group.

NOTE 20: INCOME TAX

R&D tax concession recognised in profit or loss	-	425,781
	-	425,781
Income tax expense for the year can be reconciled to the accounting profit as follows:
Loss from ordinary activities before income tax	(2,993,668)	(4,886,965)
Income tax expense at 27.5% (2016: 30.0%)	(823,259)	(1,466,090)
Tax effect amounts which are not deductible/(taxable) in calculating taxable income
Gain recognised on debt forgiveness	(216,488)	-
Entertainment expenses	2,153	6,189
Research and development costs	-	45,288
Share-based payments expenses	-	551,899
	(1,037,594)	(862,714)
Deferred tax assets not recognised	1,037,594	862,714
Effect of research and development concessions	-	425,781
Income tax recognised in profit or loss	-	425,781

The tax rate used for the reconciliation above is the relevant corporate tax rate payable by the Company on taxable profits under Australian tax law.

Deferred tax assets have not been recognised in respect of the above items because it is not possible at this stage of development to explicitly confirm the probability that future taxable profit will be available against which the Company can utilise these benefits.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 30 June 2017

Year ended 30 June 2017 \$	Period from 20 August 2015 to 30 June 2016 \$

NOTE 21: FINANCIAL INSTRUMENTS

Capital Management

The Group manages its capital to ensure that entities in the Group will be able to continue as going concerns while maximising the return to stakeholders. The capital structure of the Group consists of net debt (borrowings as detailed in note 16 offset by cash as detailed in note 18) and equity (detailed in notes 27 and 28).

As at reporting date, the Group had net debt of \$1,745,518 (2016: \$692,778) and equity of \$5,253,589 (2016: \$5,253,588).

Categories of financial instruments

	30 June 2017 \$	30 June 2016 \$
Financial assets
Cash and cash equivalents	1,396,756	39,110
Trade and other receivables	17,402	555,166
Financial liabilities
Borrowings	3,142,274	731,888
Trade and other payables	1,384,786	547,514

Financial risk management objectives

The Group's finance function provides services to the business, co-ordinates access to banking facilities, and monitors and manages the financial risks relating to the operations of the Group in accordance with the decisions of the directors.

In the reporting period, the Group was not exposed to material financial risks of changes in foreign currency exchange rates. Accordingly, the Group did not employ derivative financial instruments to hedge currency risk exposures.

Interest rate risk management

The Group is exposed to interest rate risk because the Group borrows funds at both fixed and floating interest rates. The risk is managed by the Group by maintaining an appropriate mix of fixed and floating rate borrowings, in addition to non-interest bearing loans.

In the reporting period, the Group was not exposed to material risks of changes in interest rates and interest rates, because approximately 99% of borrowings were non-interest bearing. Accordingly, the Group did not employ derivative financial instruments to hedge interest rate risk exposures.

Credit risk management

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral, where appropriate, as a means of mitigating the risk of financial loss from defaults.

The Group does not have significant credit risk exposure to any single counterparty at the reporting date.

The credit risk on liquid cash funds is limited because the counterparties are banks with high credit-ratings assigned by international credit-rating agencies. The Group is not exposed to credit risk in relation to financial guarantees given to banks, because it has no such guarantees outstanding at the reporting date.

Liquidity risk management

Ultimate responsibility for liquidity risk management rests with the board of directors, which periodically reviews the Group's short, medium and longterm funding and liquidity management requirements. The Group manages liquidity risk by maintaining reserves and banking facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities where possible.

Fair value of financial instruments

The directors consider that the carrying amounts of financial assets and financial liabilities recognised in the consolidated financial statements approximate their fair values.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 30 June 2017

	30 June 2017 \$	30 June 2016 \$
NOTE 22: KEY MANAGEMENT PERSONNEL COMPENSATION The aggregate compensation made to key management personnel of the Group is set out below:
Short-term employee benefits	555,191	-
Superannuation fund contributions	52,743 607,934	- -

On 1 September 2017, the Company issued 32,000,000 options to entities associated with Mr Dean Joscelyne and Mr Marc Goldman. Each option entitles the holder to purchase one fully-paid share in the Company for \$0.25 per option over the 5-year life of the option.

NOTE 23: RELATED PARTY TRANSACTIONS

The immediate parent and ultimate controlling party of the Group is Joscelyne Investments Pty Ltd atf Joscelyne Investments Unit Trust and YDCJ Pty Ltd atf YDCJ Unit Trust respectively. Mr Dean Joscelyne is the ultimate controlling party and a director of both of these entities, as well as Destria Pty Ltd.

Mr Marc Goldman is a director of Cloud2pt0 Group Pty Ltd.

Balances and transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note. Details of transactions between the Group and other related parties are disclosed below.

Trading transactions

During the reporting year/period, group entities entered into trading transactions with related parties that are not members of the Group, in the amounts set out below:

		Year ended 30 June 2017	Period from 20 August 2015 to 30 June 2016
		\$	\$
Related party	Nature of transaction
Destria Pty Ltd	Provider of consulting services	179,929	838,977
YDCJ Pty Ltd atf YDCJ Unit Trust	Landlord for company premises	134,331	196,613
Cloud2pt0 Group Pty Ltd	Provider of consulting services	107,461	-
Mr Dean Joscelyne	Landlord for company premises	54,027	50,545
		475,748	1,086,135

Purchases were made at market price discounted to reflect the relationships between the parties.

The following balances were outstanding at the end of the reporting period:

	30 June 2017	30 June 2016
	\$	\$
Amounts owed to related parties
Destria Pty Ltd	144,427	809
YDCJ Pty Ltd atf YDCJ Unit Trust	193,318	78,674
Mr Dean Joscelyne	61,262	30,490
	399,007	109,972

The amounts outstanding are unsecured and will be settled in cash. No guarantees have been given or received in respect of these amounts owed.

The related parties have confirmed that they will not call on the outstanding payable balance owed to the Company for a period of at least 12 months from the date of the approval of these financial statements, until such time the Company has sufficient available resources.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 30 June 2017

	30 June 2017 \$	30 June 2016 \$
Loans from related parties
Destria Pty Ltd	-	365,310
YDCJ Pty Ltd atf YDCJ Unit Trust	-	334,502
Joscelyne Investments Pty Ltd atf Joscelyne Investments Unit Trust	-	3,476
	-	703,288

During the period ended 30 June 2016, the Group was provided unsecured loans by related parties that were either at rates comparable to the average commercial rate of interest, or which were non-interest bearing.

On 31 May 2017, Dean Cameron Joscelyne and his related entities forgave \$1.1m of debts owed by the IXUP Group.

NOTE 24: PARENT ENTITY INFORMATION

The accounting policies of the parent entity, which have been applied in determining the financial information shown below, are the same as those applied in the consolidated financial statements. Refer to note 2 for a summary of the significant accounting policies relating to the Group.

Financial Position

Assets
Current Assets
Trade and other receivables	24	-
Total Current Assets	24	-
Non-Current Assets
Investments in subsidiaries	5,253,588	-
Loan to related party	-	1
Total Non-Current Assets	5,253,588	1
Total Assets	5,253,612	1
Liabilities
Current Liabilities
Borrowings	523	-
Total Current Liabilities	523	-
Total Liabilities	523	-
Net Assets	5,253,089	1
Equity
Issued capital	3,413,927	1
Equity-settled reserve	1,839,662	-
Accumulated losses	(500)	-
Total Equity	5,253,089	1
Financial Performance
Loss for the year	(500)	-
Other comprehensive income	-	-
Total comprehensive income	(500)	-

The Company has neither guaranteed the debts of its subsidiary entities, nor has it entered into any contractual commitments for the acquisition of property, plant or equipment.

The Parent Entity was incorporated on 3 May 2016.

NOTE 25: CONTINGENT LIABILITIES

Incentive payment to Mr Marc Goldman - payable after completion of the IPO 50,000 -

Page 22

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 30 June 2017

30 June 2017	30 June 2016
\$	\$

NOTE 26: SUBSIDIARIES

Details of the Group's material subsidiaries at the end of the reporting period are as follows:

Name of Subsidiary	Principal activity	Place of incorporation and operation	Proportion of ownership interest and voting power held by the Group	Proportion of ownership interest and voting power held by the Group
IXUP Operations Pty Ltd (formerly "IXUP Pty Ltd")	Development and sale of software	Australia	100%	0%
IXUP IP Pty Ltd	Holder of intangible assets	Australia	100%	0%

On 19 October 2016, the Company acquired 100% of the issued shares of IXUP Operations Pty Ltd (formerly "IXUP Pty Ltd") and as consideration issued shares in the Company to each former shareholder of IXUP Operations Pty Ltd (formerly "IXUP Pty Ltd") as part of a restructure of the IXUP Group.

NOTE 27: ISSUED CAPITAL

30 June 2016	Number of shares	Issued Capital
On issue at formation	1	1
Issued for purchase of assets	49,999,999	513,925
New equity raised	14,750,000	2,950,000
Costs of raising new equity	-	(50,000)
	64,750,000	3,413,926
30 June 2017	Number of shares	Issued Capital
Balance at 1 July 2016	1	1
Issued for purchase of assets	64,750,000	3,413,926
	64,750,001	3,413,927

Changes to the then Corporations Law abolished the authorised capital and par value concepts in relation to share capital from 1 July 1998. Therefore, the company does not have a limited amount of authorised capital and issued shares do not have a par value.

NOTE 28: EQUITY-SETTLED RESERVE

	30 June 2017	30 June 2016
	\$	\$
Balance at beginning of year/period	1,839,662	-
Issue of 11,426,470 warrants	-	1,839,662
Balance at end of year/period	1,839,662	1,839,662

On 19 October 2016, 11,426,470 warrants were issued to Asia Principal Capital Group Pte Ltd as part of a restructure of the IXUP Group. Subject to the terms of the warrant deed, the warrants entitled the holder to subscribe for the number of ordinary shares in the Company equal to 15% of the fully diluted outstanding capital of the Company. These warrants were cancelled and an equivalent number of options were issued in their place on 1 September 2017.

To determine the fair value of the warrants, the IXUP Group engaged the support of a professional adviser, who estimated the fair value of the warrants using a widely accepted valuation methodology and assumptions based on historical data for similar publicly-listed securities.

NOTE 29: EARNINGS PER SHARE

	Year ended 30 June 2017 \$	Period from 20 August 2015 to 30 June 2016 \$
Loss after income tax attributable to the owners of the parent	(2,993,668)	(4,461,184)
Weighted average number of ordinary shares used in calculating basic and diluted earnings per share	45,236,302	60,730,854
Basic loss - cents per share	(6.6)	(7.3)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

for the year ended 30 June 2017

30 June 2017	30 June 2016
\$	\$

NOTE 30: SUBSEQUENT EVENTS

The following events occurred after the reporting date:

a) On 28 August 2017, Cygnet raised \$250,000 in funding for the IXUP Group in the form of an increase in the Group's Convertible Note.

b) On 1 September 2017, the Company issued 32,000,000 options to entities associated with Mr Dean Joscelyne and Mr Marc Goldman. Each option entitles the holder to purchase one fully-paid share in the Company for \$0.25 per option over the 5-year life of the option.

c) On 1 September 2017, the Company issued 11,426,470 options to Asia Principal Capital Group Pte Ltd and 11,426,470 warrants were cancelled. Each option entitles the holder to purchase one fully-paid share in the Company for \$0.25 per option over the 5-year life of the option.

d) On 4 September 2017, the Company issued 5,162,500 shares to convert debts owed by the IXUP Group totaling \$826,000 into equity.

e) On 4 September 2017, the Company issued 1,031,250 new shares to raise \$165,000.

f) On 4 September 2017, the Company changed its name from "IXUP Holdings Pty Ltd" to "IXUP Limited".

NOTE 31: COMMITMENTS FOR EXPENDITURE

Operating lease arrangements

Operating leases relate to office leases with lease terms of 3 years. Non-cancellable operating lease commitments are as follows:

Not later than 1 year	81,600	165,648
Later than 1 year and not later than 5 years	-	84,048
Later than 5 years	-	-
	81,600	249,696

On 18 August 2017, the Company exercised an option to renew its office leases for a further term of 3 years.

NOTE 32: REMUNERATION OF AUDITORS Auditor of the company

Audit of the financial statements	10,000	11,000

The auditor of the IXUP Group is William Buck Audit (WA) Pty Ltd.

DIRECTORS' DECLARATION

The directors declare that:

(a) in the directors' opinion, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable;

(b) in the directors' opinion, the attached financial statements are in compliance with International Financial Reporting Standards, as stated in Note 2 to the financial statements; and

(c) in the directors' opinion, the attached financial statements and notes thereto are in accordance with the Corporations Act 2001, including compliance with accounting standards and giving a true and fair view of the financial position and performance of the Consolidated Entity.

Signed in accordance with a resolution of the directors made pursuant to s.295(5) of the Corporations Act 2001.

On behalf of the Directors

Director:	$R_{A}$ $\bullet$ Dean Cameron Joscelyne

Dated:

22 September 2017

IXUP Limited

Independent auditor's report to members

Report on the Audit of the Financial Report

Opinion

We have audited the financial report of IXUP Limited (formerly IXUP Holdings Pty Ltd) (the Company and its subsidiaries (the Group)), which comprises the consolidated statement of financial position as at 30 June 2017, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies and other explanatory information, and the directors' declaration.

In our opinion, the accompanying financial report of the Group, is in accordance with the Corporations Act 2001, including:

(i) giving a true and fair view of the Group's financial position as at 30 June 2017 and of its financial performance for the year ended on that date; and

(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001.

Basis for Opinion

We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board's APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.

We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor's report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Material Uncertainty Related to Going Concern

We draw attention to Note 2 of the financial report which indicates that the consolidated entity incurred a loss of \$2,993,668 and experienced net cash outflows from operating and investing activities of \$2,200,872 during the year ended 30 June 2017. As stated in Note 2, these events or conditions, along with other matters as set forth in Note 2, indicate that a

CHARTERED ACCOUNTANTS & ADVISORS

Level 3, 15 Labouchere Road South Perth WA 6151 PO Box 748 South Perth WA 6951 Telephone: +61 8 6436 2888 williambuck.com

IXUP Limited

Independent auditor's report to members

material uncertainty exists that may cast significant doubt on the consolidated entity's ability to continue as a going concern. Our opinion is not modified in respect of this matter.

Other Information

The directors are responsible for the other information. The other information comprises the information in the Group's annual report for the year ended 30 June 2017, but does not include the financial report and the auditor's report thereon.

Our opinion on the financial report does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of the Directors for the Financial Report

The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error.

In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

Auditor's Responsibilities for the Audit of the Financial Report

Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the

U.S. William Buck

IXUP Limited

Independent auditor's report to members

Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report.

As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.
• Conclude on the appropriateness of the directors' use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Group to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion.

We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

IXUP Limited

Independent auditor's report to members

We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

Willow Buck

William Buck Audit (WA) Pty Ltd ABN 67 125 012 124

Conley Manifis Director Dated this 22^nd day of September, 2017